Economy, industry consolidation take toll on Interop

The recent Interop Las Vegas had its bright spots: cloud computing generated genuine buzz; HP flexed its growing muscles; and dozens of innovative products were rolled out. However, there was no escaping the fact that the dour economy and significant market consolidation have taken their toll on the network industry and its biggest general trade show.

Interop officials were still tabulating attendance numbers at press time, but some estimates put the total at 15,000, about 25% less than the previous year. Or put another way, about half that of the International Council of Shopping Centers show, which took place in Vegas the same week.

Beyond the attendance figures, though, one of the most striking changes was Cisco's modest physical presence at the event. Its booth size was a fraction of what it has been in past years, and what it did have was mainly to highlight its partners' wares. Cisco had one executive on a keynote panel, but otherwise gave way to leaders from HP, F5 Networks and Skype (Cisco CEO John Chambers last spoke there in 2007).

As one attendee put it: "You can't put on a networking conference without Cisco."

There was talk that the company would not have come at all were it not afforded free exhibition space, though an Interop spokeswoman assured us that Cisco "ranked in the top tier of sponsor investment/spend in the event" and even produced a custom Web site for the event. Some took Cisco's relatively low-key approach to the show as a sign of the company's utter dominance in Ethernet switching and IP routing.

"Interop needs Cisco more than Cisco needs Interop," says Zeus Kerravala, a Yankee Group analyst. "Cisco's been trying to make [its own Cisco Live!] Networkers the premier networking show.

"What Interop has to hope for -- and really where a lot of the focus of the keynotes should be -- is how to promote the F5s, and 3Coms and HPs and companies like that, and establish them as real competitors to Cisco," he added. "That will make Cisco have to come back to Interop."

Indeed, companies -- from Brocade to HP to 3Com to Juniper -- are taking aim at Cisco as it attempts to gain greater control of data centers with a blend of network, storage and server offerings, and many of those companies did make noise at Interop. Whether they will give Cisco a real fight remains to be seen.

While HP disappointed Wall Street with its most recent financial results and CEO Mark Hurd was less than optimistic about IT spending for the rest of the year, Interop was HP's turn to shine.

The company boasted a massive booth just inside the entrance to the trade show floor that included a life-size Halo virtual conferencing room. It also joined Microsoft (a modest exhibitor at Interop) in announcing a four-year agreement to invest as much as $180 million in building a complete corporate infrastructure for unified communications and collaboration. What's more, HP Senior Vice President Marius Haas delivered the opening keynote address and put the industry on notice that it was claiming the "clear alternative to Cisco" title.

The opportunity has perhaps never been better for HP ProCurve, which has been making substantial market share gains in Ethernet switching over the past couple of years to become the No. 2 vendor behind Cisco. At the same time, rivals such as Nortel have been struggling.

"Users are saying their networks are overly complicated, proprietary, expensive, and they are held hostage with no choices," Haas said. "There's no reason there can't be change driven by industry standards that puts customers back in control. There needs to be a catalyst though, with the willpower to make that change in the industry. HP is going to be that driving force."

To that end, HP ProCurve is expected to expand its data center switching arsenal with a 48-port top-of-rack 10G Ethernet switch; a data center core switch approaching or exceeding 100Gbps per slot; and FibreChannel over Ethernet unified I/O switches (possibly via a deal with Brocade).

Separately, longtime Cisco rival 3Com was back at Interop for the first time in four years displaying its three brands: 3Com small business gear, H3C enterprise equipment and Tipping Point security tools. On the network equipment front, 3Com, like HP, stressed the opportunity to appeal to customers looking to do more with less.

This year's Interop was also a reflection on broad industry trends beyond classic networking, including cloud computing and mobile devices in the enterprise.

Interop included the Enterprise Cloud Summit show-within-a-show to focus on the huge industry movement around the concept of turning physical data center assets and resources into a virtualized service infrastructure. Merrill Lynch last year called cloud computing a $100 billion opportunity, one that's being chased aggressively by traditional network and computing players such as Cisco, IBM and HP, as well as less traditional Interop sponsors such as Amazon. VMware, IBM, HP and other executives were featured in cloud-themed keynote presentations.

Among other things, issues related to cloud pricing models were tackled at Interop.

"The reason cloud is compelling is the pricing levels," said Allan Leinwand, a Panorama Capital partner who moderated a vendor panel at the show. But the cloud industry has come up with several types of billing options, and they're not always easy to understand.

"You're talking about units that people don't normally think about," Leinwand said. "CPU hours: that's not something I go buy. I buy a blade server, and the hours are infinite, they're mine."

On the mobile front, a standing-room-only crowd took in a session on iPhones in the enterprise and raised a slew of questions about the security implications.

Despite enthusiasm over such topics, results from surveys conducted at the show were indicative of the tough times in the IT industry and most industries in general. Some 58% of 930 attendees surveyed by Interop said their IT budgets will be flat to down this year compared with 2008.

And even those that are spending aren't totally happy with their latest purchases. Virtualization, a huge component of cloud computing and next-generation data center architectures, has yet to prove its payoff, according to a survey by one vendor. Most of the 120 IT officials surveyed reported more problems with virtualization than benefits.

Regardless, many vendors were still pleased with the show, which had its attendance squeezed not just by the economy but also Swine Flu concerns. One exhibitor representative, who declined to be quoted by name, said his company's total investment in the show was $500,000 but the leads it generates will turn into multiple millions in revenue. That has to give hope to Interop organizers that the event still serves a purpose even as companies cut back on business travel and IT buyers have so many sources for the sort of information they can find at big trade shows.

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